India, US work on WTO deal ahead of Modi visit

  • Shishir Gupta and Gaurav Choudhury, Hindustan Times, New Delhi
  • Updated: Sep 22, 2014 09:27 IST

India and the US are working on a compromise formula on food subsidies to remove a major irritant in the stalled World Trade Organization (WTO) deal ahead of Prime Minister Narendra Modi’s meeting with President Barack Obama in Washington later this month.

Top government sources told HT that India and US were working to revise the terms of the so-called trade facilitation agreement (TFA) for easier, faster and cheaper trade by making systems transparent and cutting red tape ahead of the Modi-Obama summit.

Once the two sides agree on broad contours, it should pave the way for a new agreement at the WTO.

This and many more big tickets announcements are expected when Modi visits the White House on September 29-30 after meeting other world leaders on the sidelines of the UN general assembly in New York.

Read: US nudge on WTO position continues

India has made it clear that state-funded welfare schemes for the poor were non-negotiable even taking the blame for blocking the TFA in July as it did not come bundled with a roadmap for rules on food subsidies.

The TFA would have hit India’s food security programme and food grain procurement through the minimum support prices (MSP).

As part of a revised proposal, India and the US are learnt to be discussing the finer nuances of an indefinite “peace clause” on food security until a permanent solution is found, the sources said.

A “peace clause” gives legal security to member countries and protects them from being challenged under other WTO agreements.

Developed nations have shown support for a “peace clause” that would agree to developing countries’ demands on food security for a period of four years.

India, however, is pushing for a guarantee for further exemption until a permanent solution is negotiated and a way found to allow countries the right to provide higher subsidies to their poor beyond these four years.

When US secretary of state John Kerry visited India in July, the PM conveyed to Washington that the WTO deadlock should not come in the way of a much larger relationship, officials said.

Besides, sources said, Obama was keen on a “productive summit” with Modi, with the White House also pushing hard for the thorny WTO issue to be sorted out before the two leaders meet.

In July, India withstood mounting pressure from the developed countries, including the US, which had blamed New Delhi’s “rigid stand” for the collapse of the talks, putting the WTO’s future in “uncertain ground.”

India is of the view that without a permanent solution, its food subsidies and public stockholding programmes such as buffer stocks will be hampered.

Read: 'India talking to WTO members on food subsidy issue'

Existing rules cap the value of food subsidies at 10% of the value of production. But, the subsidy is calculated against three-decade-old prices which have since risen many fold. It means that many countries will find it difficult to stay within the WTO limits, potentially attracting strong penalties.

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